The Clear Evidence That QE FAILS to Produce Jobs

Over the last five years, the US Federal Reserve has substantially changed the investing landscape of the capital markets in the last 12 months. In particular we need to assess how ongoing QE programs affect notions of “risk” and rates.

In the period from March 2008 to late 2013, the Federal took a series of strategic steps to attempt to rein in the financial crisis and to support certain financial institutions that it deemed most critical to the health of the financial system.

These steps consisted of cutting interest rates to zero and engaging in rounds of Quantitative Easing, commonly referred to as QE.

QE in its simplest form consists of printing new money that is then used to buy US debt, called Treasuries. The Fed has made a myriad of claims for why it did this (to help housing, the help the economy, etc.) but the blunt reality is that this policy was primarily a means of financing the US deficit, which swelled in the post-2008 period as the public sector expanded rapidly in an effort to pick up the economic slack in the private sector.

The US went into the 2007-2008 Crisis with a national debt of $5 trillion and unfunded liabilities (Medicare, social security) somewhere in the ballpark of $50 trillion. And as the debt ballooned in the post-2008 era due to Government spending, it became more and more important for the Fed to maintain low rates: any increase in interest rates would mean much larger interest payments on a rapidly growing debt load.

This is why the Fed has maintained near zero interest rates as the US nati0nal debt swelled to $16 trillion. It’s also why the Fed continues to engage in QE despite the clear evidence over the last four and a half years that it is not an effective tool for stimulating economic growth or a rise in employment.

Regarding this latter point, I want to draw your attention to the labor participation rate below. The official unemployment rate is highly charged politically as it is used by the media to gauge how well a particular administration is doing at generating job growth.

As such the unemployment numbers are routinely massaged to the point of no longer reflecting the true number of unemployed Americans. For this reason, I prefer to use the labor participation rate when gauging the health of the US jobs markets: this metric represents the number of Americans who are currently employed as a percentage of the total number of Americans of working age.

As you can see, the number of employed Americans of working age peaked in the late ‘90s. It has since fallen to levels not seen since the early ‘80s. Moreover, looking at this chart it is clear that job creation has failed to keep up with population growth.

This negates any claims of “recovery” in the jobs market.

In particular, I want to draw your attention to the last five years of this chart below. The US Federal Reserve began its first QE program, called QE 1, in November 2008. Since that time it has launched three other such programs, spending over $2 trillion in the process.

During this period, the labor participation rate has not once experience a sustained uptrend. Put another way, job creation has never outpaced population growth to the point of creating a significant turnaround in the jobs market. This has happened despite the recession officially “ending” in mid-2009.

The evidence here is clear. QE does not generate jobs in the broad economy.

like you need evidence to prove that if you take a shit, it's going to smell

the Fed still fucking did it

so the real question is why did they do it? so Barry could get re-elected? to offset Chinese credit expansion? to fuck the middle class? just because? to fuck Europe and force them into a liquidity crisis?

white papering is so fucking useless these days - given enough time/money/effort, facts can say almost anything - opining with some supporting fact is far more useful

While the theme of your article is unlikely to engender much controversy in this forum, you might be well served by taking a minute to proofread your writing before posting it. Even the most elegant arguments fail to gain credibilty when espoused in a second grade vernacular. Just sayin'.

Hell we KNOW QE doesn't improve the job market one iota, and that's a fact. Perhaps the question we should be asking is, what DOES QE do? IMHO it converts taxpayer money into Bankster money, pure and simple and for no other purpose.

Once you understand that the Federal Reserve is a private corporation created to maximize the harvest of real assets from the public through manipulation of the money supply, you can easily realize that its policies have nothing to do with unemployment, unless you include the continued employment of banker/wankers. Bankers have maintained an unholy alliance with governments since 1694, and they are not about to hang separately now.

The Fed has a dual mandate - to control inflation and to help employment. By their own numbers there is no inflation (and even a fear of deflation) so there is nothing that QE does for that. So if QE also does nothing for employment, then hy have a Fed?

The Federal Reserve owned by Regional Banks rather than our elected political leaders have the responsibility to maintain employment and economic policy ? Sumptin wrong unless you believe Multinational Big Biz have your welfare in mind and do not practice international tax avoidance . DUH ! Oh I forgot , small business will save the day and the public sector will continue to hire ad infinatum. DUH !

"The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates."